At the 86th legislative session, state officials tackled big topics this year including property taxes, school finances and flood mitigation. However, only a handful of bills related to unincorporated areas passed.
Community Impact Newspaper has crafted a primer on these issues and how new laws may affect the Katy area.
SB2: Property tax reform
What it does: Senate Bill 2 creates an online database where information about property tax rates will be accessible for property owners, said state Sen. Paul Bettencourt, R-Houston, author of the bill. It also prevents cities and counties with more than 30,000 people from collecting 3.5% more maintenance and operations property tax revenue than the previous year without voter approval. SB 2 takes effect Jan. 1, 2020.
Why it matters: This is the first time Texas has overhauled its tax system in 38 years, Bettencourt said. He expects property owners of a $179,00 home to see their property tax bills decrease by about $140 in 2019 and about $293 in 2020.
SB 2 will also standardize the appraisal process, which will help Katy-area residents who own property in two or more counties, he said.
However, SB 2 may place restrictions on local governments from gaining enough revenue to provide public safety and build new infrastructure, said Bennett Sandlin, the executive director of Texas Municipal League, an organization that advocates for cities. But the bill’s effects on some Katy-area governments may be minimal, he added.
The cities of Katy and Fulshear have populations under 30,000, so they can raise $500,000 more than the previous year without automatically triggering an election, according to Sandlin. Voters in these smaller cities can still petition to hold an election under certain circumstances to approve the revenue growth.
Harris County Budget Officer Bill Jackson said SB 2 will affect the county but not as much as some may expect because the cap is only for existing property, or land with structures on it, and not new property, or land with new construction.
“For Katy and Harris County, because of the tremendous growth, it could have a lesser impact,” he said.
Waller County Judge Trey Duhon said he applauded legislators’ efforts to lower property taxes but noted the revenue cap will cause major problems for many counties with a growing list of unfunded mandates. Fort Bend County Judge KP George said all local governments are in a tough position.
HB3: School finance reform
What it does: House Bill 3 provides $6.5 billion toward school funding and increased teacher compensation. An additional $5.1 billion will help lower local district property tax rates. School districts cannot collect 2.5% more property tax revenue than the previous year without voter approval. It goes into effect Jan. 1, 2020.
Why it matters: HB 3 is one of the largest attempts to reform the state’s school finance system. It provides tax relief and increases funds to Katy ISD with state dollars. State Sen. Paul Bettencourt, R-Houston, estimates between SB 2 and HB 3, property owners will pay about $460 less annually in property taxes in 2021.
KISD gains funding per student, and staff will see a salary increase, KISD Chief Financial Officer Christopher J. Smith said. KISD estimates it will gain $25 million to $30 million to its 2019-20 budget.
Smith expressed concerns about HB 3. Property tax collections will be based on current-year values instead of prior-year values. The basic allotment was increased to offset the change, but it many not be enough, and the use of current-year values creates budget challenges, he said.
KISD does not gain as much additional funding as other districts because the new funding formula no longer takes into account statewide differences in geography and related costs based on the cost of education index, he said. Instead, the funding formula generates more funding for districts with high numbers of students who are low-income, special education, dyslexic and bilingual as well as districts with below average cost of education indexes and little property value growth.
Smith said there are concerns about HB 3’s sustainability because districts will be reliant on the state for funding instead of property taxes.
SB 6, 7, 8, & 500: Flood mitigation
What it does: Senate Bills 6, 7, 8 and 500 are all related to flood mitigation, and here is what each bill will do:
- SB 6 requires the state to establish disaster response and recovery guides on flooding by 2020 for local officials. It goes into effect Sept. 1.
- SB 7 establishes the Flood Infrastructure Fund and the Texas Infrastructure Resiliency Fund to provide funding for SB 6 and SB 8. The funds create financial structures to pay for flood and drainage projects. FIF goes into effect Jan. 1 if voters approve it Nov. 5, while TIRF goes into effect immediately.
- SB 8 requires the state to create a statewide flood-mitigation plan by September 2024. The bill is intended to create a regional flood-protection plan. It goes into effect immediately.
- SB 500, among other things, appropriates funds for Hurricane Harvey repairs, recovery and disaster-prevention projects. It goes into effect immediately.
Why it matters: Nearly two years after Hurricane Harvey, the state is providing additional funds and loans to pursue flood-mitigation projects across the state. The bills will help Katy-area governments be prepared for responding to floods.
Russ Poppe, executive director of the Harris County Flood Control District, said Harris County plans to apply for state assistance and loans worth several hundred million dollars. Fort Bend County Judge KP George said the funds from the bills will help finance major watershed projects.
Katy ISD Chief Financial Officer Christopher J. Smith said at the June 17 board meeting KISD may receive funds from SB 500 to help pay for Hurricane Harvey repairs.
SB 1303 & HB 956: Unincorporated land legislation
What it does: Several bills related to unincorporated areas were filed, and two bills that will affect the Katy area received the governor’s signature.
SB 1303 will ensure a municipality, such as Houston, inform property owners in its extraterritorial jurisdiction—or a band of unincorporated land surrounding the city’s limits it can eventually annex—of any changes in zoning regulations. Cities must also inform residents of plans to annex their property as well as create publicly available ETJ maps.
HB 956 will allow county assistance districts, or CADs, to be dissolved.
Why it matters: About 82% of the Katy-area’s population lives in Houston’s ETJ, where the city regulates development and can levy sales tax through strategic partnership agreements, or SPAs—and share the revenue—with municipal utility districts. But ETJ residents cannot vote in city council elections, and many call this taxation without representation.
SB 1303 will help inform residents in Houston’s ETJ of the regulation powers the city of Houston has, said Carole Lamont, an assistant aide to Harris County Precinct 3 Commissioner Steve Radack.
HB 958, which died in committee, would have provided a way for some residents in Houston’s ETJ a way to remove themselves from the ETJ. HB 957, which also died in committee, would have forced Houston to share SPA revenue on public projects in Fort Bend County. Both bills received opposition from residents concerned about how SPAs would have been affected.
A series of CAD bills were filed, but only HB 956 will become law. The other bills that failed would have given Fort Bend County additional tools with sales tax for public projects in unincorporated areas. The governor vetoed two bills because they did not provide adequate safeguards to protect against abuse, per press releases.
But Fort Bend County Precinct 3 Commissioner Andy Meyers, the impetus behind HB 958, HB 957 and the CAD bills, has not lost hope.
“We’ll be back,” he said.